Landlords are charging higher rents for office buildings popular with hedge funds and investment managers in midtown Manhattan.
The most recent data available from real-estate firm Jones Lang LaSalle show that so-called high asking rents for premium space have gone up 4 percent since September 2016, reaching an average of $144 per square foot. JLL’s Hedge Fund Index, which tracks 25 trophy buildings in midtown Manhattan with a high concentration of hedge funds, investment managers and financial services boutiques, shows that asking rents for space leased directly from landlords is more than $100 per square foot for all the buildings and $200 per square foot for three.
The office market in Manhattan strengthened following the election of President Donald Trump, according to Cynthia Wasserberger, executive managing director at JLL, who focuses on financial services. While financial-services firms have anticipated a boost from the administration’s plan to rollback regulations and reduce corporate and personal taxes, the increased rents come as many hedge-fund managers are under pressure due to their high fees and mediocre performance.
The highest-price direct space can be found for tower and penthouse floors at 9 West 57th Street, 520 Madison Avenue, and 65 East 55th Street, said Wasserberger, noting that landlords are giving concessions to maintain strong “sticker” prices.
JLL also found that Hudson Yards has been driving prices higher in the trophy market this year, with Law firms Cooley and McKool Smith both signing office leases for more than $100 per square foot.
But the draw of Hudson Yards and other West side developments could change as renovated and reconstructed projects in the Plaza District become available, according to Wasserberger. Buildings that are being renovated include 159 E. 53rd St., 399 Park Ave., 425 Park Ave and 390 Madison.
Meanwhile, office space that’s not considered premium has become cheaper. Low asking rents at buildings included in the JLL index have dropped 3 percent since September 2016 to an average $89 per square foot, largely because there is a large supply of subleases available. Subleases are generally offered at a 25 percent discount to offices rented directly from landlords.
